Why did our attorneys rate State Farm as our worst insurance company for 2015?

July 13, 2015by Steven Gursten

Here are the reasons we feel State Farm is the worst auto insurance company in the nation

State Farm has appeared frequently on the pages of this auto law blog over the past year. Unfortunately for State Farm, that’s because the giant auto insurance company gave our attorneys so much to write about.

From the way State Farm treats auto accident victims and how the insurer handles No Fault claims (State Farm even went so far as to demand a paralyzed man who was hit by a car when crossing the street have No Fault insurance for his wheelchair), to how it charges people with perfect driving records but less-than-perfect credit more for auto insurance, State Farm was the insurance company that our attorneys wrote about more than any other.

Our pick is based on our own automobile accident cases that we litigate with State Farm, and the real people we’ve helped. The list also includes consumer complaints, pricing, value for premium dollar and auto insurer ratings from J.D. Powers and Associates and consumerreports.org.Our full guide includes more information on each insurer and tips on how to choose the insurance company that’s right for you and your family. You can order a hard copy of the guide or download it for your Smartphone.

The top reasons State Farm Mutual Automobile Insurance Company top on our list of the worst insurance companies

There are plenty of reasons State Farm tops our list of the “Worst Auto Insurance Companies” for 2015.

But the No. 1 reason continues to be that out of every single insurance company that we see, State Farm gives its own insured customers who are hurt and depend upon No Fault insurance benefits the hardest time of any insurer. And as the largest law firm practicing exclusively Michigan automobile accident cases, trust us, we see them all. For example, the following is sad, absurd, but very true story about how State Farm chose to target one car accident victim and deny him desperately needed insurance benefits. This story encapsulates the feeling that so many people and lawyers have about State Farm:

George Veness had been paralyzed from the waist down years earlier in work-related accident. State Farm became involved after he was subsequently hit by a car in his wheelchair while crossing the street.

State Farm denied the claim, claiming that Mr. Veness did not have No Fault auto insurance coverage on his (wait for it) wheelchair. Mr. Veness was using his wheelchair to cross the street when he was struck by a car.

State Farm tried to justify its unjustifiable position by claiming that Mr. Veness’s motorized wheelchair qualified as a “motor vehicle” under the No Fault Law and, thus, should be treated like a car or truck for purposes of obtaining No Fault auto insurance coverage. Because Mr. Veness did not have No Fault coverage on his motorized wheelchair, State Farm argues, he should be treated as an “uninsured” driver and, thus, was deemed ineligible to collect No Fault benefits.

At the same time State Farm was making this legal argument in court to deny the claim, neither State Farm – nor any other insurance company in Michigan – actually insured motorized wheelchairs.

In other words, Mr. Veness couldn’t have purchased this auto insurance for his wheelchair even if he wanted to (and assuming he would have thought that a wheelchair needed to be insured with car insurance).

Here are some of the other reasons that State Farm tops the personal lists of so many auto lawyers, including mine, as the “worst” of all insurance companies for 2015…

‘Mad dog’ defense tactics used by State Farm against its own customers

In a “bad faith” case brought against State Farm Mutual Automobile Insurance Company by one of its insured customers, the Utah Supreme Court highlighted the following instances of “reprehensible conduct” and “egregious and malicious behavior” on State Farm’s part:

Fraudulent practices toward minorities, women and the elderly: “State Farm’s fraudulent practices were consistently directed to persons – poor racial or ethnic minorities, women, and elderly individuals – who State Farm believed would be less likely to object or take legal action”);

State Farm’s IME policy to reduce payouts

Any auto accident victim who has been forced to undergo an “independent” medical evaluation (IME) by an insurance-company doctor knows very well that the doctors who perform these one-time evaluations are far from “independent.” The IMEs are ordered by the auto insurance company, conducted by a doctor chosen and paid by the insurance company and are geared toward finding any “reason” an insurance can use to deny an insurance claim.

State Farm’s $30 million IME policy sheds important light on how the process works. Based on advice from the consulting firm McKinsey & Company (which had advised Allstate about using Colossus claims adjusting software and the high-pressure tactics it adopted to force low-ball settlement offers on auto accident victims), State Farm implemented an IME policy to reduce No Fault payouts – and increase profits – by $30 million.

The policy calls for the increased use of IMEs to settle claims for cheaper amounts than what the claims might be worth. Additionally, the policy required that IME could only be conducted by pre-approved doctors who can be expected to disagree with the diagnoses and treatment conclusions of independent treating physicians and healthcare professionals. Also, defense attorneys representing State Farm were to follow State Farm’s instructions as to how IMEs should be used, what doctors should be contacted and the issues that should be addressed – and/or avoided.

State Farm denies valid uninsured motorist benefits claim

State Farm used stonewalling, misrepresentation and deception to deny an auto accident victim’s claim for ‘uninsured motorist’ benefits. In Woodruff v. State Farm, the Michigan Court of Appeals blasted State Farm for using these tactics to deny an auto accident victim’s “uninsured motorist” benefits claim. Here’s what the court said about each issue:

Stonewalling: “State Farm’s inexcusable failure to provide [the auto accident victim] with a copy of the policy effectively prevented [her] from complying with the policy’s conditions for the recovery of uninsured motorist benefits;”

Misrepresentation: “State Farm’s representatives made significant misrepresentations concerning the applicable policy” and its “contractually shortened period of limitations” and, thus, the time period during which the auto accident victim could “assert her claim;”

Deception: State Farm had “failed to give Woodruff fair notice” of its defenses and had “engaged in a course of conduct” that “reasonably led Woodruff to believe she had complied with the terms” of State Farm’s UM policy.

State Farm denies benefits to an injured pedestrian hit by a car

State Farm ignored its own policy language to deny benefits to pedestrian struck by a State Farm insured customer.

Here’s what happened: A State Farm Mutual Automobile Insurance Company insured customer crashed into a woman while she was walking her dog. She made a claim on the driver’s State Farm liability. Even though State Farm’s policy defined “occupant” as including a person who is “on” the covered vehicle and it was undisputed that the pedestrian was “on the vehicle’s hood,” State Farm denied the woman’s claim, calling it “ridiculous” and insisting that she was not an “occupant” in the conventional sense.

The federal 6th Circuit Court of Appeals rejected State Farm’s argument, noting that, not only is it uncivil to call an opponent’s argument “ridiculous,” but it’s also unwise, especially when “the argument that State Farm derides as ridiculous is instead correct.”

State Farm charges more to consumers with bad credit

State Farm charges auto insurance prices that are 127% to consumers with ‘poor’ credit scores.

Research by the Consumer Federation of America (CFA) shows that State Farm charges drivers “with poor credit scores much higher prices” for auto insurance – approximately 127% higher – “than drivers with excellent scores,” according to a press release announcing the publication of CFA’s report, “The Use of Credit Scores by Auto Insurers: Adverse Impacts on Low- and Moderate-Income Drivers.”

State Farm also charges 45% more to consumers with ‘no credit’ than those with ‘excellent credit.’ In its “2014 Car Insurance by Credit Score Report,” consumer website WalletHub reported that State Farm “display[ed] a 45% premium fluctuation” between the auto insurance prices charged to consumers with “excellent credit” and those with “no credit.” For more information, take a look at my blog post, “How do credit scores punish Detroit residents when paying for auto insurance?”

Consumers are complaining about State Farm

Complaints from Michigan consumers have increased. Consumer complaints against State Farm Mutual Automobile Insurance Company increased 14% between 2007 and 2013, according to data gathered by the Michigan Department of Insurance and Financial Services (DIFS).

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